WeWork is in talks to merge with a special-purpose procurement company, according to people familiar with the matter, an agreement that would introduce the company that rents offices in public markets more than a year after its high-level failure. to organize a traditional initial public offering.
WeWork’s board of directors and chief executive Sandeep Mathrani are weighing bids from a SPAC affiliated with Bow Capital Management LLC and at least one other unidentified acquisition vehicle for weeks, the people said. A deal could value WeWork at about $ 10 billion, some people said. It was not known if this included debt.
The company has also received separate bids for a new round of private investment and could follow suit, one man said. If it did, WeWork would remain private and use the money to support its growth initiatives.
The talks are complicated and there is no guarantee that WeWork will reach any agreement, people warned.
“Over the past year, WeWork has remained focused on executing our profitability plans,” said Lauren Fritts, WeWork’s communications director. “Our significant progress, combined with the growing market demand for flexible space, shows positive signs for our business. We will continue to explore opportunities that help us get closer to our goals. ”
Private companies are flooding special purpose procurement companies or SPACs, to bypass the traditional IPO process and get a public listing. The WSJ explains why some critics say that investing in these so-called worthless companies is not worth the risk. Illustration: Zoë Soriano / WSJ
WeWork is a major player in the market for flexible office space. He signs long-term leases with landlords, then, after renovating and furnishing a space, subleases small offices or even entire buildings to tenants for just one month in a row.
If WeWork makes its public debut through a SPAC, it would cover what had been a long, bumpy road to a list. WeWork’s attempt to reach public markets in 2019 failed when investors rejected the losing company and its visionary but irregular leader, Adam Neumann, who later resigned as president and CEO.
It would also be one of the brightest markers in a madness that surrounds SPACs or vacuum verification companies, as they are also known. SPACs go public as empty vehicles without a deal and then hunt down one to block. The transaction turns the target into a public company into a business that can be less time consuming and cumbersome than a traditional trading offer.
This year alone, more than 80 new SPACs have debuted, nearly five per business day, according to data provider SPAC Research.
Bow Capital Management is led by Vivek Ranadivé, owner of the Sacramento Kings of the NBA and founder of Tibco Software Inc. SPAC raised $ 420 million last year. The venture firm is hiring Shaquille O’Neal as an advisor.
Mr. Mathrani is almost a year away from his term as CEO of WeWork, at which point he faced not only a company that was bleeding money, but also a pandemic that forced people to stay away from offices.
While the commercial office space market has been hit by the virus, WeWork has had a large cash cushion thanks to end-of-2019 bailout funding from SoftBank Group Body.
At the start of the pandemic, WeWork had already begun closing many locations, renegotiating leases and selling non-core businesses, and cutting thousands of jobs to cut costs.
The company did not seek capital and did not need cash immediately, some people said. WeWork, which was in danger of running out of cash when the IPO collapsed, had more than $ 3 billion in its balance sheet since the third quarter, when it reported the latest results. Mr Mathrani said he expects WeWork to become profitable by the end of 2021.
WeWork had a negative free cash flow of $ 517 million in the third quarter, with revenue of $ 811 million, down 8% from the second quarter.
SoftBank owns the majority of WeWork, and the future role of the Japanese technology conglomerate will be a key factor in negotiations with potential merger partners or new investors.
A $ 10 billion valuation would be far from WeWork’s peak valuation in early 2019, when a round of SoftBank funding set it at $ 47 billion.
SoftBank and other investors have been drawn to WeWork’s rapid growth – doubling its revenue each year. But this increase was fueled by extraordinary levels of spending, which led to equally rapid increases in losses. Following the failed IPO, WeWork has reduced Mr Neumann’s great vision of providing a range of 21st century services around the world.
As inventories fell in the spring of last year, SoftBank reduced its company’s valuation to $ 2.9 billion.
“Eliot Brown contributed to this article.”
Write to Maureen Farrell at [email protected] and Konrad Putzier at [email protected]
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